IN NEED OF REFORM? A TRANS-TASMAN
PERSPECTIVE ON THE DEFINITION OF
"RESIDENCE"
Clinton R Alley
Senior Lecturer
Department of Accounting
The University of Waikato
Duncan Bentley
Assistant Professor of Law
Bond University
"Residence" is an important concept in the taxation regime of a
country. This article compares the statutory definition of this
concept for an individual taxpayer in New Zealand and Australia.
It focuses particularly on the effect of the 1988 amendments to the
New Zealand statutory definition, and concludes with
recommendations on a revised Australian definition.
Why is residence for an individual of such great importance?
Australia taxes "residents" on their world wide income, irrespective
of the source of that income, and taxes "non-residents" only on that
income which has its source in Australia.1
A similar basic rule is used in New Zealand. "Residents" of New
Zealand are assessable for New Zealand income tax on income
derived from any part of the world. This applies whether or not
this income is remitted back to New Zealand. "Non-residents" are
1
40
Section 25(1) of the Income Tax Assessment Act 1936.
Clinton R Alley and Duncan Bentley
"Residence" In Need of Reform?
assessable for New Zealand income tax only on income derived from
New Zealand.2
The definition of "residence" is becoming increasingly important to a
wide range of taxpayers, particularly to those who either choose to
spend time working overseas, or are required to as part of their
employment. Taxpayers travelling overseas may wish to be
considered non-residents to avoid tax in the country from which
they are travelling. Other taxpayers may wish to argue that they
are still residents although they live overseas, because this may
allow them to take advantage of resident rebates, exemptions and
lower rates of taxation.
In defining whether a taxpayer is resident the Australian Income
Tax legislation uses a complex definition of "residence". "Nonresident" is not defined and implicitly includes those taxpayers
who do not fall within the "resident" classification. The New
Zealand legislation defines both a "resident" and a "non-resident",
using a simpler definition.
In their definitions, both New Zealand and Australia rely in part
on an arbitrary number of days presence in (and for New Zealand,
absence from) the relevant country to determine residence status. As
crucial to the definitions, but far less arbitrary and, as a result, more
difficult to define, is the concept of "permanent place of abode".
The complexity of the Australian definition is further increased by
the use of the common law definition of residence and the concept of
"domicile".
The more complex the definition, the less satisfactory it is for
taxpayers who wish to determine their residence status. As
overseas business secondments in particular become more common and
increasingly short-term, the ease or complexity of determination of
residence status starts to impact upon the cost of operating in
another country. Accordingly, in addition to the problem of
uncertainty, a complex and unclear definition of residence has the
potential to harm both revenue collections and business investment.
"RESIDENCE" IN NEW ZEALAND
The test for determining whether a taxpayer (a taxpayer being
either an individual or a company) is a resident in New Zealand is
Section 242 of the Income Tax Act 1976 and s BB 3 Income Tax Act 1994.
41
(1995) 5 Revenue L J
stated in s 241 of the Income Tax Act 1976. It is a twofold definition
that, unlike the Australian definition, defines when a taxpayer is
both resident and non-resident. Until 1988 a person was adjudged a
resident in New Zealand if that person had a permanent place of
abode in New Zealand, or was present in New Zealand for a
continuous period of 365 days, with certain permitted absences.3
A person was not a resident if absent from New Zealand for a
continuous period of 365 days, with certain permitted absences.4
Permanent place of abode was not mentioned in the definition of a
non-resident.
Defining non-residence solely on the number of days spent in New
Zealand exposed the flaws in this type of definition. It lead to
some interesting cases and to a situation that was exploited by many
New Zealand taxpayers. For example, most universities allow a
period of study leave or sabbatical leave which their tenured staff
accumulate for each year of paid work. This can be accumulated to a
maximum of a year. As noted, persons under the previous laws could
cease to be a resident if they were outside the country for a
continuous period of 365 days or more. As it was quite common for
a university lecturer or professor to take his or her study leave for
the longest possible period of one year, they could arrange to be out
of the country for just over the year. Being no longer a New Zealand
resident, such a taxpayer ceased to be liable for income tax on New
Zealand income for that period. As a normal salary was still being
earned while on sabbatical leave and since the period out of New
Zealand could be spread over two different income tax years, a
university lecturer on a salary of say $60,000 could save in excess of
$18,000 in tax over these two tax years. This was obviously a strong
contributing factor to the decision to remain out of the country for at
least 365 days and a great help in covering the costs of an expensive
study leave.
There were, however, some unfortunate cases. One of them dealt
with an Auckland university lecturer who had taken the maximum
leave possible so that he could be out of New Zealand for 365 days.5
He had arranged his flight back during a weekend so he would come
back just after 365 days, but strictly speaking would not have to be
away from the university more than the required year stipulated.
4
5
42
Under the former s 241(1) a "continuous period" allowed a break of not
more than 28 intervening days, as long as those intervening days did not
exceed in aggregate 56 days in the income year.
Ibid.
Case F138 (1984) 6 NZTC 60,237.
Clinton R Alley and Duncan Bentley
"Residence" In Need of Reform?
He was due to arrive back the day after the 365 day continuous
period. It so happened that the actual flight coming back on that
day .was scheduled to arrive close to the previous day. However,
the aeroplane was flying with a tail wind and actually arrived at
Auckland half an hour earlier than intended. He therefore arrived
in New Zealand on the 365th day of his absence from New Zealand.
The Inland Revenue Department became aware of this and instead
of saving the marginal tax for the two adjoining years he was forced
to pay the tax attributed to his full salary for these two years.
Arriving back half an hour early on his flight may well have cost
him over $18,000.
The New Zealand government was concerned about the potential
loss of tax and moved to change the residency rules for individuals.
A definition of non-residence based solely on days leads to
exploitation of the arbitrary and artificia! nature of the statutory
definition. It is a poor reflector of the real residence status and
leads to loss of revenue. Accordingly, in 1989, a new definition on
the determination of place of residence was introduced-in s 241 of
the Income Tax Act 1976.
THE PRESENT RULES
Just who is and who is not a New Zealand resident is covered in the
following definitions of s 241:6
An individual is resident in New Zealand if that person:
(1)
has a permanent place of abode in New Zealand or
(2)
has been present in New Zealand for at least 183
days of any 12 month period.
An individual ceases to be a resident in New Zealand if:
(1) that person is absent from New Zealand for more
than 325 days of any 12 month period and
(2)
during that period of absence has at no time a
permanent place of abode in New Zealand and
(3)
is not absent in the service of the Government of
New Zealand.
A person present for any part of a day is deemed to be in
New Zealand for the whole of that day.
Under this amended legislation, the "permanent place of abode"
concept has taken on greater significance to overcome the
arbitrariness of a test based solely on the number of days spent in
6
Section OE 1 of the Income Tax Act 1994.
43
(1995) 5 Revenue L J
the country. Persons are New Zealand residents if they have
a permanent place of abode in New Zealand or if they have been
personally present in New Zealand for more than 183 days in a
twelve month period. It is an either/or situation so that only one of
those situations need apply for that person to be adjudged a
resident. The reduction in the number of days from 365 to 183 days in
12 months reflects the reality of modern travel and the transitory
status of many taxpayers. Conversely, to be a non-resident a person
must have been out of the country for more than 325 days in any
twelve month period and must not have had a permanent place of
abode in New Zealand. Both criteria must apply. This introduces
the permanent place of abode concept into the definition of a nonresident.
The broadening of the definition is revenue driven. It is easier to
become a resident and subject to the tax laws than it is to become a
non-resident and fall outside the New Zealand tax laws applicable
to residents. There does not appear to be any reason for the reduction
in the number of days it takes to become a non-resident from 365 to
325. However, the fact that it only takes 183 days to become a
resident, as compared to the 325 days to become a non-resident,
underlines the importance of double tax treaties in protecting
against the potential double taxation consequences of being
classified as a dual resident.
Permanent place of abode
The increased significance of a "permanent place of abode" in the
definition of "residence" means that it is important to consider what
is meant by this concept. The only case under the old definition that
throws any light on this is Geothermal Energy New Zealand Ltd v
CIR.7 The judgment concluded that "home" was a place around
which the taxpayer’s domestic life revolved. That is, in the case of
a married man, where his wife and children resided at that
particular time and, in the case of single people, the place which is
the centre of their interests and affairs.
It follows that an individual’s "home" is not determined by the
ownership of any interest in the residence or property, a view
previously held by the Commissioner of Inland Revenue. Although
it is not defined in the Act, the Commissioner has indicated factors
7
44
(1979) 4 NZTC 61,478.
Clinton R Alley and Duncan Bentley
"Residence" In Need of Reform?
that will be considered in determining an individual’s permanent
place of abode. These include:
the presence of the person in New Zealand, whether
continuous or interrupted;
accommodation, whether owned or not;
social ties, family membership of clubs etc;
economic ties, bank accounts, credit cards, investment,
superannuation funds etc;
employment or business in New Zealand, whether
permanent or transient and casual;
personal property, whether furniture, clothing, car etc have
been maintained in New Zealand;
welfare benefits received in New Zealand;
intentions, whether the intention is to live in New Zealand
or return overseas after a period of time.
You can maintain similar ties or even a residence, or physical home,
in other countries but still be a New Zealand resident for tax
purposes. If you have an enduring relationship in New Zealand
that is a "permanent place of abode" you will always be a resident
of New Zealand. This test overrides the rules relating to the
number of days you are in New Zealand.
In late 1993, Case Q558 concerned the residency for tax purposes of a
university professor on study leave in Europe. The issue in contention
was whether the professor had a permanent place of abode in New
Zealand while he was overseas for a period in excess of one year.
While overseas the professor received a salary from a New
Zealand university and his Auckland home was rented out under a
fixed term lease. The professor was absent from New Zealand for
368 days.
This case was decided under the present law. Therefore the
professor was subject to the overriding permanent place of abode test
that, as a resident who was absent in excess of 325 days over a
twelve month period, he was deemed not to be a New Zealand tax
resident unless he had a permanent place of abode in New Zealand.
If it were found that the professor did not have a permanent place of
abode in New Zealand, he would not have been liable for tax on any
income which was not derived in New Zealand for that period. As
the professor was working and therefore earning his salary outside
8
(1993) 15 NZTC 5,313.
45
(1995) 5 Revenue L J
New Zealand, it could be held that although paid by a New
Zealand university this salary was derived outside New Zealand.
Permanent place of abode has evolved to mean a place where a
person normally or habitually lives and a place with which the
person has an enduring relationship. These factors were evidenced
in this case by the professor’s connections to New Zealand through
his employment, club memberships, bank accounts, investments,
properties he owned and his home.
Having a permanent place of abode in another country does not
affect whether this person also has a permanent home in New
Zealand. While in Europe the professor maintained foreign bank
accounts and owned a car, but he admitted to the Taxation Review
Authority that he did not establish another home and did not have
a permanent place of abode overseas.
The contentious issue in this case was the importance that the New
Zealand home should be given in determining the existence of a
permanent place of abode when the home was unavailable for the
period the professor was away. The Inland Revenue Department
have stated, along with the list they issued as a guide, that the
permanent place of abode test does not focus solely on the ownership
or availability for use of a dwelling.
The Taxation Review Authority found that the paramount factor in
assessing residency was a person’s ties with New Zealand. Despite
the professor being unable to return to his home during the time he
was overseas, he still had a permanent place of abode in New
Zealand. The short-term unavailability of the home for the
professor’s use was outweighed by his intention to occupy it, and its
eventual availability upon his return to New Zealand. Time is
obviously important in deciding residency and, as the professor was
absent from New Zealand for only one year, the connections with
New Zealand were given more importance. It was found that he
remained a resident of New Zealand and was therefore liable to
pay tax on all his world wide income, whether derived in New
Zealand or elsewhere.
46
Clinton R Alley and Duncan Bentley "Residence" In Need of Reform?
"RESIDENCE" IN AUSTRALIA
In Australia individuals are resident if they are:9
®
Australian residents under common law (the common law or
ordinary meaning test); or
®
domiciled in Australia, unless the Commissioner is satisfied
that their permanent place of abode is outside Australia
(the domicile test); or
in Australia, continuously or intermittently, for more than
one half of the year of income, unless the Commissioner is
satisfied that their usual place of abode is outside
Australia and they do not intend to take up residence in
Australia (the 183 day test); or
®
a member of certain Commonwealth superannuation schemes
(or the spouse or child under 16 of such a member).
The Australian definition is more complex and less clear than the
New Zealand definition. This reflects a less modern drafting style
and a tendency to complexity for which the Australian statute has
become infamous. The last statutory test is fact specific and limited
in operation and is not considered in this article.
Common law residence test
This test is not used in New Zealand. There is substantial relevant
case law both in Australia and the United Kingdom which attempts
to determine the ordinary meaning of residence at common law and
it is this ordinary meaning that forms the starting point in
determining whether or not a taxpayer is resident.10 The underlying
theme is that a taxpayer resides in the place where he or she has a
"home". This is a question of fact, and if a taxpayer is found to have
a "home" in Australia, there is no need to proceed further.
The word "reside" was defined by Viscount Cave LC in Levene v
IRC: 11
and is defined in the Oxford English Dictionary as meaning
"to dwell permanently or for a considerable time, to have
one’s settled or usual abode, to live in or at a particular
place." ... In most cases there is no difficulty in determining
where a man has his settled or usual abode, and if that is
9
10
11
Section 6(1) Income Tax Assessment Act 1936.
Applegate v FCT 79 ATC 4307; (1979) 9 ATR 899.
(1928) AC 217 at 222.
47
(1995) 5 Revenue L J
ascertained he is not the less resident there because from
time to time he leaves it for the purpose of business or
pleasure.
His Honour also cited Cesena Sulphur Co Ltd v Nicholson:12 "there
is not much difficulty in defining the residence of an individual; it
is where he sleeps and lives."
There may not have been much difficulty in applying such a
definition in 1876. It is often less clear today, so that where
the application of the ordinary meaning of residence is uncertain,
the specific statutory definitions that extend the common law
definition become more important. In practice it is often simpler
to start with the specific statutory definitions for, if they apply to
make a taxpayer resident, there is no need to proceed with the more
detailed factual analysis necessary using the common law
definition.
In an attempt to provide clarification as to his interpretation of
the ordinary meaning of "resident" for visitors to Australia, the
Commissioner issued Income Tax Ruling IT 2607. The ruling lists
relevant factors to be considered in determining whether a visitor is
resident under the ordinary meaning. They include the location of
the person’s family, whether a place of abode is maintained outside
Australia, whether the person has assets, bank accounts and other
family, business and social ties in Australia, the existence of a
contract of employment in the person’s home country and the
expected length of the visit.
Interestingly, in order to provide more certainty, the Commissioner
states in IT 2607 that he would not usually regard a person who
intends to visit Australia for less than six months as resident, but
that he would usually regard as resident a person who intends to
stay in Australia for more than two years.13 These tests would, of
course, only apply to visitors who could show that they had a
permanent place of abode outside Australia, in order to avoid the
application of the specific statutory tests. However, the fact that
they are used by the Australian Taxation Office ("ATO") shows
that, from a practical necessity standpoint, arbitrary time tests, as
at least one limb of a definition, do provide the certainty that both
taxpayers and the ATO want from the law.
12 (1876) LR 1 Ex D 428.
13 1W 2607 at para 12.
48
Clinton R Alley and Duncan Bentley
"Residence" In Need of Reform?
A similar ruling IT 2681 has been issued for business migrants. That
ruling has a further list of indicators of residence specific to such
migrants. The list takes account of the fact that business persons
migrating to Australia to establish a business may have to spend
some time travelling frequently between their country of origin and
Australia until the business is established. The ruling attempts
to give some guidance to individuals who may find it difficult to
ascertain their residence status under the provisions.
The common law residence rule both duplicates in part and also
detracts from the certainty of the application of the specific
statutory tests. For example, it is argued14 that where a person is a
resident according to ordinary concepts, the 183 day rule would not
operate. Therefore, intending migrants would be treated as
commencing to reside in Australia from the date of their first
arrival rather than for the whole of the year of income, which
would_ be the case under the 183 day rule.
Domicile test
There are essentially three types of domicile in Australian tax law:
domicile of origin, which is generally the domicile of the father at
the date of birth (with special rules for an illegitimate child);
domicile of choice, which is established by the Domicile Act 1982
(Cth) and the intention to select a new permanent place of abode;
and domicile by operation of law, which applies when, for
example, a child’s domicile changes as a result of its parents
changing their domicile.
Although Australian domicile may be established, the individual
will still not be treated as a resident if that individual’s permanent
place of abode is outside Australia.
Permanent place of abode
The leading Australian authority on the words "permanent place of
abode" is Applegate v FCT.15 It is also frequently quoted in New
Zealand residency case law where the definition of a permanent
14
15
See Woellner, Vella and Bums, Australian Taxation Law (5th ed 1994
CCH); Deutsch, Gates, Gibson, Hanley and Payne, Butterworths
Australian Tax Handbook 1995 (1995 Butterworths) 20.
(1978) 8 ATR 372; (1979) 9 ATR 899.
49
(1995) 5 Revenue L J
place of abode has become even more important following the
change in the legislative definition of residence. In Applegate v
FCT it was held that "permanent" does not mean "everlasting" and
that if a taxpayer has an intention to make a home outside
Australia for the time being, then that will be an important element
in characterising the home as a permanent place of abode. This
allows for taxpayers to become non-residents, even though they may
have the intention to return to Australia at some point in the future.
The principle has been applied in subsequent cases.
In Applegate v FCT Fisher J stated:16
To my mind the proper construction to place upon the phase
"permanent place of abode" is that it is the taxpayer’s fixed
and habitual place of abode. It is his home, but not his
permanent home. It connotes a more enduring relationship
with the particular place of abode than that of a person
who is ordinarily resident there or who has there his usual
place of abode. Material factors for consideration will be
the continuity or otherwise of the taxpayer’s presence, the
duration of his presence and the durability of his
association with the particular place.
Permanent place of abode is not defined by the legislation in either
Australia or New Zealand, so case law is very important. As the
New Zealand Inland Revenue have produced a set of guidelines for
taxpayers, so has the ATO issued similar guidelines in Income Tax
Ruling IT 2650 on residency. The ruling (at paragraph 23) offers a
useful check list of criteria for establishing "permanent place of
abode":
the intended and actual length of an overseas stay;
whether there is any intention to return to Australia or to
travel on to another country;
whether the taxpayer has established a home outside
Australia;
whether the taxpayer has abandoned a home in Australia
to go overseas;
the duration and continuity of the taxpayer’s presence in the
overseas country; and
the durability of association with a place in Australia, as
evidenced by bank accounts, notifications to relevant
authorities, and family, social and business ties.
16
50
79 ATC 4307 at 4317.
Clinton R Alley and Duncan Bentley "Residence" In Need of Reform?
The criteria mentioned in the New Zealand and Australian
guidelines are very similar, although none of the factors is decisive.
However, it is important to note that the Australian definition
focuses on a permanent place of abode outside Australia in contrast
with the New Zealand requirement of a permanent place of abode
inside New Zealand. From an evidentiary perspective this makes
the New Zealand definition easier to administer and control.
Consistent with FCT v Jenkins,17 IT 2650 recognises that the
existence of a permanent place of abode is a question of fact in each
case and that the duration of an individual’s stay or intended stay
out of Australia is not, of itself, conclusive and must be considered
along with all other relevant factors. This is in contrast to the
specific time element in the New Zealand legislation. However,
given the practical advantages of setting down a broad time limit,
the Commissioner exercises his discretion in IT 2650, as he does in
IT 2607, and states that as a general rule he will accept that a
taxpayer becomes a non-resident after two years spent abroad.
As a result, in order to help them qualify under the ruling for nonresident status, taxpayers seconded overseas have tended to
negotiate contracts for periods longer than two years, or open-ended
or renewable contracts with a two year minimum period. This is
somewhat arbitrary, as is the New Zealand legislation, but the
certainty it gives to taxpayers compensates for this. The downside
is that the ATO requires compelling reasons to treat someone as nonresident who has been overseas for less than two years. It should be
noted that in both FCT v Applegate and FCT v Jenkins the
individuals were treated as non-resident, although in both cases
they were actually absent from Australia for less than two years.
A significant practical consequence of the difference between the
New Zealand and Australian definitions of residence arises from
the New Zealand focus on an individual having a permanent place
of abode in New Zealand as compared with the Australian focus on
an individual having a permanent place of abode overseas. Under
the New Zealand definition, provided any time requirements are
satisfied, residence would only appear to apply to individuals
while they are actually in New Zealand. So they would become
resident on arrival and cease to be resident on departure.
In Australia, on the other hand, residence continues until a
permanent place of abode is established overseas. Non-residence
17
(1982) 12 ATR 745.
51
(1995) 5 Revenue L J
ceases when an individual relinquishes a permanent place of abode
overseas. This can lead to complications. For example, expatriates
working overseas can be detrimentally affected in that payments
made to them in respect of services performed as non-residents or
income earned from any source while overseas could in fact be
derived by them as Australian residents, once they have given up
their permanent place of abode overseas, even though they have not
physically returned to Australia. It is fairly common for
expatriates to take leave overseas after a secondment and prior to
returning to Australia. If the domicile test applies, they will no
longer have a permanent place of abode outside Australia and,
consequently, any income derived while on leave will be taxed in
Australia on the basis that they are resident. This again leads to
uncertainty and the need for taxpayers to have high-level
professional help to navigate a safe passage through the
complexities of the Tax Act.
183 day test
The half year or 183 day rule is calculated by days and hours in
Australia as in New Zealand. The hard luck story recounted from
Case F 138 above18 was replicated in Wilkie v Inland Revenue
Commissioners19 where a taxpayer present in the UK for 182 days
and 20 hours in an income year of 366 days, was held not resident for
a period equal to six months.
In Australia if this test applies a person is treated as resident for
the entire income year. This is not the case in New Zealand where
the residency applies as from the first day of arrival in New
Zealand counted in the 183 days.
The fact that the Australian legislation refers to more than one
half of "a year of income" means that a person could be in Australia
for just under half of two years of income, that is for a total of just
under a full year, and not become a resident under this test. The
New Zealand legislation appears to get around this problem by
referring, in both tests, to a number of days in "any twelve month
period".
In New Zealand the 183 day test stands on its own: if you satisfy
this test you are a resident. In Australia you must also satisfy the
18
19
52
Case F138 (1984) 6 NZTC 60,237, above n 5.
[1952] 1 All ER 92.
Clinton R Alley and Duncan Bentley
"Residence" In Need of Reform?
requirements that your usual place of abode is not outside Australia
and that you do not intend to take up residence in Australia. This
test helps to determine when a person takes up residence in
Australia but does not help in determining when a person has ceased
to be a resident. The term "usual" is used for this test rather than
"permanent" place of abode, but how these terms differ is unclear.
Accordingly, the factors applicable to the definition of a permanent
place of abode under the domicile test would also apply in
Australia.
CONCLUSION
Australia’s tax legislation is currently being rewritten under the
auspices of a Tax Law Improvement Project.20 Its stated aim is "to
rewrite the law with a better structure, and make it easier to
understand".21 This does not specifically go to the substance,
although substantive change is not precluded in order to achieve the
stated aim.22 The definition of residence is one area-where
simplification of the definition should include substantive change.
This is necessary to overcome the shortcomings of the existing
legislation and to give statutory effect to the approach taken in
practice by the Commissioner.
If the rules for residence can be postulated in a brief, clear and
concise manner yet still cover all the necessary circumstances, as it
appears the New Zealand legislation comes close to achieving, this
must be a desirable feature. The New Zealand legislation
overcomes several problems identified in the Australian
legislation:
Many of the Australian cases that have eventuated from
the Australian s 6(1) residence rules relate to an attempt to
define, from this legislation and case law on the definition
of a resident, a definition of a non-resident, there being no
definition of a non-resident in the Australian tax
legislation. Those dealing with New Zealand residence
rules have been saved this difficult and often fruitless
activity by the inclusion of a definition of a non-resident in
the legislation, albeit more restrictive than that of a
20
21
22
Announced by the Australian Government on 17 December 1993, to run
over three years.
Information Paper No 2 - Building the new tax law, Tax Law Improvement
Project Team, May 1995.
Ibid.
53
(1995) 5 Revenue L J
resident. The New Zealand government was predictably
more interested in an individual being a resident than a nonresident when the legislation was drafted. A taxpayer is a
resident if present for at least 183 days and a non-resident if
absent for more than 325 days in any 12 month period. It
would be more equitable to make the time periods equal.
However, a similar general approach in Australia would be
much more effective than the current legislation.
The New Zealand legislation overcomes the arbitrariness of
a test based solely on the number of days present or absent
from the country by using the permanent place of abode test
as an alternative. However, it manages to avoid the
complexity of the Australian definition of residence. A
similar approach in Australia would give effect to the way
the Commissioner has in practice attempted to exercise his
discretion.
Focusing on the existence of a permanent place of abode in
Australia rather than outside Australia, in the way the
New Zealand legislation is drafted, eliminates many
unnecessary evidentiary and control problems for both the
ATO and the taxpayer. It also helps to make the law more
certain and less likely to be unwittingly contravened.
It will always be necessary to clarify the law with court
decisions. However it would be preferable not to have
multiple definitions for the same essential phrases and not
to rely on a changing common law rule when a statutory rule
could be clearly stated.
As "permanent place of abode" has become a crucial concept in both
Australia and New Zealand it should be defined, or at least the
guidelines should be given, in the respective statutes.
There is always room for improvement in tax legislation. There are
problems with the New Zealand statutory definitions - for
example, the difference between the 183 day rule for residency and
the 325 day rule for an individual to cease to be a resident can lead
to some interesting scenarios - but different countries can learn from
each other and improvement and correction to the legislation should
be a continuing process. The time must be right for a revision of the
Australian residency legislation.
54